UK Finance Does Not Keep Old Part 2 Records. So How Do You Check What a Lender Required?

A conveyancing file may be reopened many years after completion. A defect may emerge during a later sale, a lender may question the original transaction or a complaint may be made about the advice given at the time.

In each situation, one question can become critical:

What did the mortgage lender actually require when the transaction completed?

Looking at the current UK Finance Mortgage Lenders’ Handbook may not answer that question. Lenders amend their requirements, remove earlier answers and change the circumstances in which a matter must be reported.

More importantly, UK Finance confirms that it does not keep copies of lender-specific Part 2 answers after they have been removed from its website.

The historical gap identified by UK Finance

The UK Finance Handbook is divided into different parts, each performing a different function:

• Part 1 contains instructions applying generally to lenders participating in the Handbook.
• Part 2 contains the individual lender’s answers and lender-specific requirements.
• Part 3 contains standard instructions for transactions in England and Wales where the lender is separately represented.

For current transactions, conveyancers can consult the version available online. Historical investigations are more difficult.

In its answer to the question “Can I get an archived copy of a specific lender’s Part 2?”, UK Finance explains that Part 2 answers are maintained online by the lenders themselves. It does not keep copies once they have been removed and recommends contacting the lender directly.

UK Finance also states, in its answer concerning previous versions of Part 1, that these are not currently available, although a summary of amendments can be accessed.

An amendment summary can be useful, but it is not necessarily the same as having the complete text that applied on a particular date. A summary may identify that something changed without supplying all the surrounding wording, qualifications and cross-references relevant to the earlier transaction.

Why the current Handbook may give the wrong historical answer

A present-day Handbook search establishes what a lender records now. It does not necessarily establish what that lender required five, ten or fifteen years ago.

Requirements can change in several ways. A lender may:

• introduce a new reporting obligation;
• change an acceptance threshold;
• require additional documents or evidence;
• move a requirement to a different Handbook question;
• replace a discretionary test with detailed criteria;
• require referral to a valuer or underwriter; or
• remove wording that appeared in an earlier answer.

The difference can be important when investigating matters such as defective leases, escalating ground rent, missing building regulations approval, restrictive covenants, rights of access, estate rentcharges, flying freeholds or Japanese knotweed.

About Conveyancing has documented lender requirements changing in practice for many years. Earlier examples include Reliance on CML Handbook Changes in 2016 and Want a Handy Guide to Explain the Next Handbook Changes?.

Those contemporary reports demonstrate why it is unsafe to assume that today’s wording is simply a clearer presentation of an unchanged requirement.

Part 3 shows why the evidence retained on the file matters

The historical problem is not limited to identifying the correct wording. It is also necessary to determine what the conveyancers did in response to the instructions that applied.

This is particularly apparent in separately represented transactions governed by Part 3.

As explained in Lockton’s analysis of the risks and obligations arising under Part 3, these instructions apply where the lender’s conveyancer represents the lender but does not also act for the borrower.

Part 3 should not be read in isolation. The lender’s conveyancer must consider the applicable Part 1 provisions and the lender-specific answers in Part 2 as well.

The Part 3 process places considerable importance on enquiries, verification and retained evidence. Depending on the transaction, the lender’s conveyancer may need evidence concerning:

• the identity and status of the borrower’s conveyancer;
• certified copies of relevant documents;
• explanations given to the borrower;
• the borrower’s confirmation of the property or plan;
• execution of the mortgage documentation;
• buildings insurance;
• the source and transmission of balance monies; and
• responses to enquiries raised with the borrower’s conveyancer.

This highlights a wider principle that applies beyond Part 3: knowing what the Handbook said is only the first stage. The file should also show how the requirement was addressed.

A current instruction cannot safely be applied retrospectively

Historical investigations can go wrong when a current requirement is treated as though it must have applied at the time of the original purchase.

Suppose a lender now requires a particular defect to be reported. That does not establish that the same reporting requirement existed when an earlier transaction completed. Conversely, the removal of wording from the current Handbook does not prove that the lender had no relevant requirement in the past.

A proper investigation should normally identify:

1. the lender and lender brand involved;
2. the relevant jurisdiction;
3. the date or dates that need to be examined;
4. the Part 1 wording applicable at the time;
5. the lender’s dated Part 2 requirements;
6. any relevant Part 3 provisions;
7. the mortgage offer and case-specific instructions;
8. the Certificate of Title and correspondence with the lender; and
9. the advice and evidence retained on the conveyancing file.

The completion date will often be central, but it may not be the only relevant date. Depending on the question, it may also be necessary to consider the position when contracts were exchanged, when the title was reported or when the Certificate of Title was submitted.

What the Lexsure Lender Archive can establish

The Lexsure Lender Archive addresses an important part of the historical evidence problem by preserving dated lender-specific Part 2 records.

Instead of attempting to reconstruct an earlier requirement from today’s wording, users can examine the Part 2 position recorded for the relevant lender and date. The archive covers historical lender requirements from 2007 onwards and includes records across a range of recurring conveyancing issues.

This can be valuable when:

• a defect is discovered during a later sale or remortgage;
• a lender or insurer is investigating an earlier transaction;
• a complaint concerns an alleged failure to report a matter;
• a conveyancing practice is responding to a file request;
• a professional negligence claim is being assessed; or
• the parties disagree about what the lender would have accepted at the time.

The archive may also reveal that a lender’s position changed during the years between the original purchase and the present sale. That distinction can help separate an original conveyancing issue from a difficulty created by later lending policy.

What an archived Part 2 does not prove

An archived Part 2 is evidence of the lender-specific wording recorded for a particular period. It is not, by itself, proof that a conveyancer acted properly or negligently.

The record must be considered alongside the rest of the transaction evidence. Relevant material may include:

• the applicable Part 1 instructions;
• any Part 3 instructions;
• the mortgage offer;
• special or case-specific instructions;
• the valuation;
• correspondence with the lender;
• the report on title;
• attendance notes and client advice; and
• the professional standards applying at the time.

Silence in a Part 2 answer must also be treated carefully. It does not necessarily mean that the lender accepted the issue without qualification. A general Part 1 instruction, mortgage-offer condition or direct communication from the lender may still have required action.

Similarly, evidence that a requirement existed does not establish that it was breached. The file may show that the matter was properly reported and approved.

Historical lender evidence is becoming more important

Property defects frequently emerge only when an owner attempts to sell or remortgage. By then, the original transaction may be many years old and the lender’s online Handbook answers may have changed several times.

UK Finance’s confirmation that removed Part 2 answers are not retained on its website explains why historical research cannot always begin and end with the current Handbook.

The Part 3 obligations discussed by Lockton reinforce the need for a reliable paper trail. A conveyancing file should enable another person to understand the applicable requirement, the enquiries made, the evidence obtained and the conclusion reached.

Where the issue concerns a past lender-specific instruction, the Lexsure Lender Archive can supply an important part of that evidential picture: the dated Part 2 wording rather than an assumption based on the lender’s current position.

This article provides general information and does not constitute legal advice. Historical Handbook wording is one part of the evidence relevant to an earlier conveyancing transaction. It does not, without further investigation, establish compliance, negligence, liability or loss.